With its funky exposed brick and a room-length whiteboard, the offices of Loring Park's TreeHouse Health look like any standard Silicon Valley-style tech accelerator space.
For fresh-eyed entrepreneurs, a high-end coffeemaker waits to fuel conversations in the loft's communal spaces. An obligatory ping-pong table rests in back. And up on the wall, next to the logos of half a dozen budding med-tech companies, sits TreeHouse Health's latest innovator-tenant: Hennepin County Medical Center.
"We realized we needed to do something radically different," said Dr. Jon Pryor, CEO of the 455-bed hospital. "We have a Center for Innovation, and we have a culture here at HCMC that is trying to be innovative. Part of that is moving it out of clinics and the hospital, and trying to put them in an environment that is quieter and stimulates thought and collaboration."
A public safety-net hospital with $850 million in annual revenue is perhaps not an obvious choice to fill up the workstations in a scrappy tech accelerator inside the former Olson ad agency headquarters on Hennepin Avenue. And neither will several other big tenants slated to be announced in coming months.
The year-old TreeHouse already houses seven early-stage med-tech companies, but HCMC is the first of four "anchor tenants" planned for the space. Chairman Dr. John Blank, a health care investor and former UnitedHealth Group Inc. executive, said TreeHouse hopes to announce an insurance-company anchor tenant before the year is out. The other anchors will be a large medical device firm and a well-known retailer interested in health care delivery, though discussions are ongoing, he said.
The thinking is that the big companies will benefit from exposure to innovative minds at small firms, and TreeHouse plans to attract start-ups with realistic solutions to problems they present. The start-ups will get exposure to realities in health care that might not be obvious to young executives.
It's something Blank has seen firsthand. When he worked in innovation development at UnitedHealth, he said he encountered more than one smart young entrepreneur who had a promising idea but seemed unaware of fundamental health care concepts like HIPAA — the Health Insurance Portability and Accountability Act, which mandates strict privacy for patients' personal health information.
Organizations like HCMC "become very valuable to talk to in a number of ways," Blank said, adding that TreeHouse's businesses also get access to a patent attorney and the organization's five experienced partners.
HCMC, which is paying TreeHouse $10,000 a month under its three-year lease, is particularly interested in having its three-employee Innovation Center work on ways to innovate on the delivery of care. Pryor said one of the biggest priorities is to find creative ways to redesign health care processes so that nurses with four-year degrees aren't out fetching coffee, taking blood-pressure readings, and passing out basic medications.
"We can't focus on just gadgets. We have to also focus on processes and people," he said. "We think we can give better care to the patients, and do it in a way that will be more cost-effective."
TreeHouse Health is not the first med-tech launchpad to attract partnerships with local hospitals. San Francisco's Rock Health, probably the most well-known example, partners with California health system and payer Kaiser Permanente and Minnesota' Mayo Clinic, along with California's Blues plan.
Mayo Clinic Ventures is also a sponsor of Minneapolis' more well-known innovation incubator, Healthcare.mn, which operates out of a space on North First Avenue called the Startup Venture Loft.
Blank said several things differentiate TreeHouse Health from other efforts. First, their tenants have received start-up funding from Dalmore Investments, the closely affiliated investment fund of which Blank is president.
"We invest in all the companies. The way we will succeed is through their success," said J.D. Blank, who is managing director of TreeHouse Health and John Blank's son. Dalmore is only a small investor in each company, but TreeHouse helps to create connections to deeper, more traditional venture capital funding.
TreeHouse is also selective about which companies it supports. Dalmore has evaluated more than 200 early-stage companies, and only invested in 11, seven of which are now housed in the Loring Park building. Only companies with actual revenue or "a line of sight to revenue" are funded, John Blank said.
"They don't call themselves an incubator, they call themselves an accelerator, because they are working with companies that are working to commercialize," products and ideas that are already well-developed, said Ryan Baird, spokesman for Minnesota med-tech trade group LifeScience Alley, which is an affiliate of TreeHouse and a sponsor of Healthcare.mn.
The result is that some firms are staying in Minnesota when they might have moved to the East or West coasts to secure serious venture funding once they reach the point of commercialization. John Blank said two TreeHouse companies, one from Southern California and another from Massachusetts, have moved to Minnesota to begin production.
"It's been really good for us," said Patrick Yoder, CEO of Minnesota-born LogicStream Health, which develops software used in 45 hospitals to help support clinical decisionmaking. "The access to the partners, their contacts and their advice, has been very valuable."